Case Study

Supplement

Reference Case Studies on Application of Transfer Pricing Taxation

This document is a translation of the original Japanese-language Case Studies. The Japanese original is the official text.

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Points to Note This supplement describes the treatment for transfer pricing taxation purposes of a number of cases meeting certain preconditions. The aim is to illustrate the key points to take into consideration when applying the Commissioner’s Directive on the Operation of Transfer Pricing (Administrative Guidelines). The cases are grouped into three sections: The cases in Section 1 illustrate selecting the method of calculation of arm’s length price; those in Section 2 illustrate points to note when applying the method of calculation of arm’s length price; while those in Section 3 provide examples of advance pricing arrangement. Drawing on past cases of transfer pricing taxation and advance pricing arrangement (APA), these cases were chosen on the basis of their meeting certain preconditions in order to illustrate the important points when applying the Commissioner’s Directive on the Operation of Transfer Pricing. Thus, there are also other cases which, though similar, are based on different preconditions, and their treatment for the purposes of transfer pricing taxation will also differ as a result. When conducting transfer pricing examinations and APA evaluations in practice, therefore, attention shall be paid to the following: 1) Determining whether a particular case presents any difficulties from the point of view of transfer pricing taxation. 2) Selecting and applying the most appropriate method of calculation of arm’s length price by correctly ascertaining the particular circumstances of the foreign-related transactions in each individual case, based on the provisions of 1-2 (Basic Policies), 2-1 (Examination Policies), 5-1 (APA Policies) and other relevant provisions of the Commissioner’s Directive on the Operation of Transfer Pricing. 3)...